IRS Uses Analytics To Help Collect Delinquent Taxes

Agency has awarded SAS Institute $6.25 million to use its analytics software in its new Return Review Program.

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The IRS has awarded SAS Institute a $6.25 million contract to use its data analytics technology to help recover unpaid taxes, detect tax fraud schemes, and reduce the number of fraudulent refunds the agency pays out.

The agency is using SAS Analytics software for its new electronic Return Review Program (RRP) system, which the IRS hopes will reduce the $345 million tax gap, according to the company. The gap represents what taxpayers owe and what they pay voluntarily and on time.

Software from SAS is aimed at improving fraud detection, uncovering noncompliance when tax returns are filed rather than later on in the process, and reducing the issuance of refunds that seem suspect, according to the company.

The software also is designed to help the IRS reduce the number of fraudulent tax refunds, as well as the number of refunds that are erroneously paid out. It also can help root out fraud schemes and increase IRS tax collections, according to SAS.

The IRS plans to use the software to improve how it detects, prevents, and resolves both criminal and civil noncompliance with tax law.

"There is a significant opportunity to avoid improper refunds and payments of large sums of money," said Karen Knowles, president of SAS Federal, in a press statement.

Specific SAS products the IRS will use include Fraud Framework for Government, Social Network Analysis, and other SAS data integration, data mining, and business intelligence technologies. To analyze large amounts of data, the IRS also will leverage the company's in-database functionality, Scoring Accelerator for Greenplum, and Grid Manager, according to SAS.

Combined, these technologies will use business rules, anomaly detection, predictive modeling, and social network analysis to score tax returns to root out abnormalities or suspicious behavior on the part of taxpayers, according to the company.

A tool called SAS Text Miner also will search unstructured data--such as call center data--to uncover other possibly fraudulent activity. The software provides results of its findings to a customizable dashboard, and case-management features will allow the IRS to prioritize and assign cases, said SAS.

The public sector increasingly is tapping data analytics tools to help cut costs and create efficiencies. In fact, the use of analytics software already has proven to help recover unpaid tax money. New York's Department of Taxation and Finance said it recovered $83 million in delinquent taxes in 2010 with the use of IBM data-analytics software. The figure was an increase of 8% over the previous year, the state said.
Bolstering the use of data analytics also is a strategy the White House is adopting across the board to uncover areas of financial inefficiency and help the feds prioritize areas of investment.

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This automation is where the IRS is headed. IRS staffing for collections has increased by 11% over the last decade. Over the same period of time money collected through enforcement has increased by 163%. More automated enforcement has also show up in the form of tax liens and tax levies from the automated collection system (ACS). More info on this here: